Stock Review: Lakshmi Machine

The company has posted very good results for FY11. This is one amongst the top three global majors engaged in the manufacture of textile machinery. For FY11, they have posted top-line of Rs 1,800 crore plus EPS of Rs 125. if you go by the financials the company is not a debt free but apart from that they are sitting on a cash of Rs 750 crore.

This Rs 750 crore is after initiating a share buyback which the company made last quarter. Due to which the equity got reduced close to about Rs 11.50 crore. This cash translates into about Rs 650 per share and the share is ruling close to about Rs 2,010-2,015. Looking at their order book the company traditionally has been sitting on an order book of three years plus. This is  because of the kind of demand they have for the textile machinery.

Considering the growth of the sector, the same order book is likely to continue. There they should be able to post a growth of 25% on an annualized basis. Apart from that they had the joint venture with Rieter of Switzerland.

They are buying back their 50% stake held by Rieter in the present subsidiary of the company. Going forward, the company looks to have the good plans of ramping up their top-line as well as bottom-line.

So, with all this they should be able to post an EPS of Rs 150 for FY12 on a conservative basis. If I knock of this Rs 650 per share cash the share is virtually ruling at a PE multiple of close to Rs 10 which traditionally, used to be 20 for the last many years. On the downside it has a very limited risk but on the upside one can expect a price of Rs 2,500 in the next six months or so.